First a brief Japanese lesson, if I may. 可動率 is Operational Availability and is pronounced “ka-dou-ritsu”. 稼動率 is Rate of Operation and is pronounced “ka-dou-ritsu”. The pronunciation is exactly the same. Two out of three characters are the same, and the first character happens to have the same sound.
This is one of the many examples of word play that Taiichi Ohno was fond of using to teach the TPS philosophy. Two words that are nearly identical but are very different in meaning (as a point of interest, Operational Availability is also called “bekidouritsu” to make it possibly to tell the two apart).
可動率 as in Operational Availability is a measure of reliability of equipment. Operational Availability is expressed as the percentage of time that the equipment can operate properly when it is needed for production. It doesn’t mean that the machine has high utilization and is running all of the time. The machine may not be running at all. The key point is that the equipment needs to be available when it is needed.
Operational Availability = Time equipment actually able to run / Time when equipment is needed to run
If the equipment was down 2 hours out of a 20 hour period when the equipment was needed (available only 18 hours), the Operational Availability would be 18 hours / 20 hours = 9/10 = 0.9 = 90%.
稼動率 is Rate of Operation and this is the ratio of the products being produced to the full capacity of the equipment running at standard operating hours. The formula is:
Rate of Operation = Rate of production on the equipment / Full capacity of the equipment based on regular hours
If you have a demand of 8,000 parts today and your machine is actually capable of running 10,000 parts on a regular shift, your Rate of Operation is 8,000 parts / 10,000 = 8/10 = 0.8 = 80%.
The production demand value for Rate of Operation must be only what is needed downstream and based on actual customer demand. In other words if you have high Rate of Operation because you are overproducing, you are in fact cheating yourself.
The ‘ka” of 可 means “can” or “able to” so 可動 means “can move” or “able to run”. The “ka” of 稼 means “to make money” or “work” as in the type of work people are paid for as opposed to the scientific definition of work. So 稼動 means “working” or “making money”. Producing parts that don’t sell right now does not make money, according to the Toyota philosophy.
Taiichi Ohno emphasized that “able to run” rate was not the only goal but the “making money” rate was what really mattered for equipment. When focusing on doing kaizen on Operational Availability (可動率) you want to eliminate the equipment losses that result in the machine being unavailable when needed. Taiichi Ohno said Operational Availability should be 100%.
When you focused on improving Rate of Operation (稼動率) you should actually work on marketing and sales since it is a measurement of load on the available capacity, producing what was needed by the downstream process. Taiichi Ohno said Rate of Operation need not be 100%, knowing that making this a target would result in loading the capacity with parts that are not needed right now (overproduction).
Practically, the ideal Rate of Operation number would depend on your customer service philosophy and backlog policy. If Rate of Operation was at 100% then that means your sales (downstream pull) exactly matched your full equipment capacity during regular hours. This is not very likely to happen unless you are smoothing you schedule very effectively using heijunka, you have a backlog and there are orders waiting, or unless you are turning away sales.
When you see numbers in the news that Toyota factories are at 116% Rate of Operation it generally means that they are running overtime or extra shifts because their numerator (demand) is greater than their denominator (available plant capacity based on regular hours).
If you focus on utilization, which is another measurement completely, the result will be high machine uptime, local optimization, overproduction but high inventory, poor cash flow and bad overall performance. In the Lean manufacturing world utilization and absorption are bad words. Understanding the subtle yet clear differences between kadouritsu / bekidouritsu and kadouritsu are critical to implementing and managing a Lean operation.